Casualty and Liability Coverage Fundamentals
Domain 5 - Casualty and Liability Coverage Fundamentals
This domain tests liability coverage structure: what triggers the policy, how limits stack, and how New Mexico tort rules change the settlement math.
Commercial general liability
- Coverage A, bodily injury and property damage: premises-operations, products-completed operations; occurrence form versus claims-made form.
- Coverage B, personal and advertising injury.
- Coverage C, medical payments: no fault finding required.
- Limits: each occurrence, general aggregate, products-completed operations aggregate, damage to premises rented, and fire legal. Defense costs usually sit outside the limit.
- Key exclusions: expected or intended injury, contractual liability, your work, pollution, and employer's liability.
Other casualty lines
- Umbrella/excess: drops down over underlying limits and often broadens coverage.
- Business auto: owned, hired, and non-owned autos; New Mexico minimum liability limits apply.
- Workers' compensation: exclusive remedy against the employer, with an employers liability part.
- Professional liability: usually claims-made, so the retroactive date and extended reporting period matter more than the incident date.
New Mexico tort overlay
New Mexico follows pure comparative negligence, and liability is several rather than joint in most cases, so each defendant pays its percentage share. UM/UIM coverage must be offered; the insured may reject it in writing.
Worked example
An insured with $50,000 UM/UIM limits is injured by a driver carrying $25,000 limits. Total damages are $100,000, and the tortfeasor's carrier tenders $25,000. The UIM exposure is $100,000 − $25,000 = $75,000, capped at the $50,000 UIM limit, subject to the endorsement's offset and stacking wording. Read the UM endorsement and the rejection form before promising a number.
Traps that cost marks
- Treating the general aggregate as available for one occurrence.
- Missing a claims-made retroactive date on a professional policy.
- Assuming joint and several liability when New Mexico applies several shares.